Stronger recovery depends on housing, senior Treasury official says

Tower cranes stand next to the Wilshire Grand Tower under construction in downtown Los Angeles, Calif., on April 16, 2014.

The U.S. needs to see housing and construction bounce back more for the country to break through to the next level of the recovery, a senior Treasury official said Monday.

The official said the U.S. recovery is likely to be sustained at a level that’s stronger than other developed countries. But housing and construction have lagged behind and have to catch up to areas like manufacturing, said the official, who also stressed the importance of expanding access to credit.

Housing is among the issues likely to come up this week at two congressional hearings when Treasury Secretary Jacob Lew testifies about the work of the Financial Stability Oversight Council.

Lew will testify twice before Congress about the latest annual report of the council, which was set up by the Dodd-Frank rules on Wall Street. The FSOC has among its powers the ability to designate nonbank firms as systemically important financial institutions. That label would subject firms to oversight by the Federal Reserve. In its most recent report, the FSOC said nonbank mortgage-servicing companies were a potential emerging threat to financial stability.

The official defended FSOC’s work in advance of the hearings at the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday.

The FSOC has recently been looking into the asset management industry, another move the senior Treasury official defended, saying the council is asking questions about the industry and doesn’t yet know the answers.

Lew leads the FSOC, whose members also include Federal Reserve Chairwoman Janet Yellen and Mary Jo White, who leads the Securities and Exchange Commission.

The Treasury official also commented on the SEC’s writing of rules on money-market mutual funds, which were a source of vulnerability in the financial crisis. Securities regulators are still deciding how to limit the risks the funds pose, and The Wall Street Journal reported earlier this month tighter rules may not be finalized for several months.

The official said strong progress was being made, and the agency was expected to complete something this summer. An SEC spokesperson declined to comment.